The End of Your Car Lease: Weighing Your Options

Once you reach the end of car lease terms you have a few options in front of you. Leasing a car is unlike purchasing it through any other means. Leasing gives you added financial flexibility and it can help you in a number of ways. It gives you a cheaper payment, less worry about repairs, and many other features. However, when the lease is up, you have to make some decisions. Here are some things to think about when your lease is up.

Closed-End vs. Open-End

One thing that you will need to figure out is whether your lease is a close-ended lease or an open-ended one. If you are leasing your car for consumer purposes it will almost always be a close-ended one. If you are doing it commercially, then there is a chance that it could be open-ended.

Close-ended means that there is a definite depreciated value of the vehicle decided upon before the lease term begins. This means that when you start out, you and the car dealer agree that the car will be worth a certain amount of money when your lease is up. For example, you lease a new car with a value of $15,000. When you sign the lease, you agree that the value of the car as far as you will be concerned is $8000. When your lease term is up, the actual value of the car might be $5000. However, since you agreed on the value before the term started, you do not owe any additional money for depreciation. 

With an open-end lease, you just go by the market value. When you drive the vehicle, you pay for however much you depreciate it. If the value of the car is $5000 when you get done, you are responsible for all of the depreciation. Therefore, if you can get a closed-end lease, you should do so as it limits your financial risk.

Walk Away

When your lease is up, you can simply choose to walk away. With this option, you just drive the car into the dealership, hand them the keys, and go on about your business. You are not financially obligated to the car anymore and it is the dealer's problem to worry about now. 

Purchase

Besides ending the lease and walking away, you can also decide to purchase the car. Most of the time, the purchase amount will be determined before you sign the lease. This will allow you to know how much you will have to pay in order to buy the car after the lease term is up. Going this route is always more expensive than just buying the car outright. However, sometimes you did not expect to buy the car upfront. As you got into the lease, you decided that you wanted to buy the car. You can easily do so and convert the plan into a loan. It will cost less than an equivalent new car, but it will still be more expensive than you should have paid for the car after the time that you have driven it. 

 


Need an Auto Loan? Get a Free Quote Here!